Institutional Analysis of Japanese Economy Ⅱ

Industrialization from the 1880s not only accelerated the productivity growth but also transformed the Japanese society into a more market-oriented system, whose entire process is called the industrial revolution. The modern sectors in Japanese society composed a classical market economy from the 1880s to the 1910s. The development in the period was supported by the well-integrated international market and was at least partly accommodated by the pool of slack labor in the traditional sector.

Since the 1920s, especially in the 1930s, those favorable environments were impaired. Without a stable international financial market, the macroeconomic stability of a national economy needs to be sustained by individual states. Such a global condition exacerbated the difficulty of managing the society as the labor market became tighter as the growing modern sector absorbed slack labor in rural regions. In the end, Japan chose a state-coordinated market economy after the experiment of command economy during the second world war.

Then, from the 1980s, the economy gradually returned to the normal, rule-based market economy. The course is to overview institutional changes in the Japanese economy from the 1920s to the 2000s and understand how institutional and organizational factors work in a changing society.

The current shape of the Japanese economy would be better understood by placing the structural reform in the last three decades in a broader context from the 1920s. This is our goal.